General Motors and the Auto-Industry’s Problems

When there is a recession, people tend to be more cautious about how they spend their money, so many families have recently been cutting out extra spending. This can include everything from dinners in restaurants to new clothes or toys. – One such industry that has taken a particular hit is the automobile industry.

Because new cars are very expensive, fewer people (especially in America) have been buying new cars since the economy started having trouble. Additionally, many people have recently become more concerned over how much gasoline is used up by a car. – Because gasoline prices have become very expensive and people are concerned about using up too much of this important natural resource, many car buyers have been looking to buy smaller and more “fuel efficient” cars. Lots of companies have not been able to catch up with this sudden change and have been experiencing major drops in their sales. 

Because they have been having these problems, many automakers have had to appeal to the government for a bailout or have closed down some of their factories.

One major automobile company who recently took a big hit was General Motors, or GM. GM was the third biggest manufacturer of cars in the world, and the company has been around since 1908! Due to their recent losses, GM filed for bankruptcy (also known as “Chapter 11”) in early June of 2009. 

The good news is that filing for bankruptcy under Chapter 11 doesn’t mean that GM is gone forever. Although many people will lose their jobs or their investments in General Motors, the company will now have a chance to start anew and re-launch their company in a way that can hopefully allow it to function more effectively and make a better profit. Most likely this means that GM will be careful not to produce more cars than it can sell, and that they will start offering smaller cars that are very fuel-efficient and better for the Earth!